If talking to debt collectors is not your idea of fun, take
heart. There is a fast-growing
alternative for people with overdue bills: virtual debt negotiation.
Collection agencies are setting up websites where computers do
the work of live collectors. Using a PC or a smartphone you can review the claim,
set up a monthly repayment plan -- or even make a deal that wipes out part of your
"Some people don't want to have to talk to another
person and explain the circumstances," said David Yohe, marketing director
at BillingTree, a payment processor that tracks collection industry trends. "Shame is probably too strong a word --
maybe there is slight embarrassment."
Or maybe the shame belongs to the person on the other end of
the phone. Harassment and threats by
collection agents make the industry a magnet for consumer complaints.
Fair -- if impersonal -- treatment is one of the upsides of
dealing with a virtual collector. But there are pitfalls to watch out for also,
as the limitations of online collecting make it a poor fit for some bills.
"It has its downsides," said Manuel Newberger, an
attorney who represents debt collection companies. "You're depending on computer logic --
you don't have the human empathy factor."
About 10 percent of collection agencies use virtual debt negotiation
as part of their online portals, according to a survey of 150 companies by BillingTree and the industry journal Inside
ARM. Nearly 30 percent of agencies said
they plan to use virtual negotiation, making it one of the industry's fastest-growing
Collection companies say they are adopting the online
systems to reduce the cost of hiring live agents, but that is just part of the
reason. Another is to avoid lawsuits, complaints and regulatory hassles. The systems can be programmed to display all the
disclosure statements required in the consumer's state. And since the consumer initiates the contact instead
of a collection agent, abuses such as harassment and breach of privacy are
"It's a fairly new tool -- the technology behind it is
pretty slick," said Nick Jarman, chief operating officer at Delta
Outsource Group, a debt collector based
in O'Fallon, Missouri. After debtors type
in a settlement offer, the system weighs the figure using rules set by the
creditor. If the offer is too low, the
system may make a counteroffer, or tell the debtor to try again. "It's
almost like an actual collector," Jarman said, "without a human behind it."
Based on examples provided by software company Columbia
Ultimate -- the supplier of Delta's system -- the pathway to virtual debt
negotiation begins at the same starting point as most collection efforts: An old-fashioned letter in the mail. The
debtor -- or supposed debtor -- should receive a letter stating the amount
sought and the name of the creditor. If virtual collection is an option, the
letter will contain a Web address for the collection portal, and an authentication
number to use when entering the system.
In Columbia Ultimate's example, the first screen is a standard-looking
login page that asks your name, the code number that was sent by mail and some
identifying details, perhaps including the last four digits of your Social
|HOW ONLINE DEBT NEGOTIATION WORKS
|Columbia Ultimate, a Vancouver, Washington, debt collection company, gave CreditCards.com a demonstration of its online portal for debtors. Below are selected screen shots; click the images to expand.
After logging in, the debtor sees a menu of options. Paying the bill, all at once or in pieces, is the prominent choice here. Under the "Explore Options" button are screens for negotiating a settlement, or for setting up a monthly payment plan.
The payment screen for online debt collection looks similar to the online shopping experience. Once the payment is complete, the system generates a confirmation letter, providing documentation that the debt is paid.
Once access is granted, the next screen shows the amount you
owe to the creditor, and a menu of options. The first option: Make a payment.
"The reason you see big buttons here is, we want to
make it very simple to make a payment," said Jon Danne, sales manager for
You may split the entire amount due into two or three
payments, or make a partial payment.
Look for money-saving
Ultimate's demonstration, the options to spread out payments via a monthly payment
plan or negotiate a partial settlement are not on the first menu. They lie beneath
a button bearing the label "Explore options."
Within the option to make a settlement, an input window lets
you enter a dollar amount as a payment offer. Using a mock debt for $1,055 as an example, Danne
enters $875 as a settlement offer. The computer is not willing to go that low,
and kicks back a hypothetical counteroffer of $1,029.
The tool for setting up a monthly payment plan lets him choose
the monthly amount, within limits based on the overall length of the plan.
"If I put in $1 a month, it's going to deny that," Danne said. A
monthly payment plan spreads payments over a longer period than a settlement,
but does not offer a discount on the amount due.
The negotiation process can be fine-tuned by the creditor
and collection agency. Before making a counteroffer, the computer might analyze
data about typical settlement agreements for the size, age and type of debt. If
the analysis is more detailed, it might review the payment history of debtors
in situations similar to yours.
"There are different models, depending on how much
information you want the system to gather," Yohe of BillingTree said. "The
intent of the system is to capture as much of the original balance as
If you and the virtual collector reach an understanding, the
next step is to go to a payment screen and seal the deal. In Columbia Ultimate's example, there is an
option for a credit card payment, but most people in collections use a debit card
or electronic check instead.
The payment triggers the system to send you a letter
confirming the terms of the agreement -- or an e-mail, if you have given your
e-mail address and permission to communicate electronically about your debt.
Neuberger called the automatic creation of the letter a boon for the consumer,
as the important follow-through correspondence can be overlooked by a
collection agent in a rush to get to the next account. In addition, he said,
you can take screen shots at any point during the process, to preserve a record
of what went on between you and the virtual collector.
intent of the system is to capture as much of the original balance as
Digital has its
Who is a good candidate for online debt collection? Many
debts are not open to negotiation, agencies say, and many people being dunned
for old debts are unlikely to pay a computer. Online collection is best suited
to the willing payer or those able to "self-cure," in industry terms,
If you think there is
a billing error or you aren't certain about the amount being claimed, online
collection is definitely not the way to go. To dispute a debt, you'll need to speak with
the agency and probably correspond with them to make sure your legal rights are
preserved. Once you receive a dunning
letter, you have 30 days to reply with a letter seeking verification that you
owe the debt, under the Fair Debt Collection Practices Act.
Even if the debt is undisputed, you may be better off
talking to a live agent. If you're
having trouble finding ways to pay, the agent
may have solutions you haven't thought of, agencies say. Some people will scoff at the idea of a
helpful collection agent, but if you're trying to pay a bill, collectors are in
your corner. They might help refile an insurance claim that has been initially rebuffed,
for example, or explore possibilities of insurance coverage that you might be
unaware you have.
"People might have access to money they didn't
recognize," said Roger Weiss, president of collection agency CACi in St.
Louis. "A good collector is a great
consumer resource, because they talk to 50 or 60 people a day."
The machine gets
Then there is the rigidity of the digital world, which can
be difficult to deal with. For example,
if a payment is late without an explanation, a monthly payment plan will fall through. The agency will demand the entire
unpaid balance. A consumer has better
odds of convincing a human collector to allow a brief delay than a machine,
although some online systems can be set to allow for brief lapses of two or three
days, agencies said.
While many collection agencies are adopting virtual
collector technology, consumers are in less of a hurry to try it. Fewer than 1 percent of people dealing with
CACi use the online portal, Weiss said -- and many of them do so after getting
calls from a live agent.
"I think there's a lot of things a portal might not do
for you -- yet," Weiss said. Technological
improvements are in the works, however, that will make virtual collection more
useful, he added. And consumers are increasingly comfortable taking care of
their finances online during spare moments, a trend that could extend to paying
"If it's 1 o'clock in the morning and you can't sleep
thinking about the debt," Jarman said, "you can go online and take
care of it."
See related: Tips for dealing with debt collectors